2001 Supreme(SC) 1469

2001(8) Supreme 216
SUPREME COURT OF INDIA
(From Patna High Court)
D.P. Mohapatra and Shivaraj V. Patil, JJ.
S.W. Palanitkar & Ors. -Appellants
versus
State of Bihar & Ors. -Respondents
Criminal Appeal No. 1072 of 2001
(Arising out of SLP (Crl.) No. 953/2001)
Decided on 18-10-2001
Counsel for the Parties :
For the Appellants : Dushyant Dave, Sr. Advocate, Ms. Hemantika Wahi and Pravesh Singh, Advocates.
For the State of Bihar : Kumar Rajesh Singh and B.B. Singh, Advocates.
For the Respondent No. 2 : L.K. Bajla and Praveen Kumar, Advocates.

VERY IMPORTANT POINT
Only against appellant No. 7 a prima facia case of cheating has been made out in complaint but no offence was made out against remaining appellants as the ingredients of offences of criminal breach of trust and cheating in pursuance of criminal conspiracy alleged against them were not satisfied. Mere failure to keep up promise subsequently with dishonest intention is not cheating. No mens rea at the time of making promise is alleged. Thus issue of process against appellants 1-6 and 8 is set aside. Issue of process against appellant 7 for cheating is maintained but for offences under Sections 406 and 120B IPC is also set aside.

Headnote:(i) Indian Penal Code, 1860-Sections 405 and 406-Offence of criminal breach of trust-Breach of trust is a civil wrong entitling damages-But breach of trust with mens rea gives rise to criminal breach of trust-Ingredients.

       Held : Every breach of trust may not result in a penal offence of criminal breach of trust unless there is evidence of a mental act of fraudulent misappropriation. An act of breach of trust involves a civil wrong in respect of which the person wronged may seek his redress for damages in a civil court but a breach of trust with mens rea gives rise to a criminal prosecution as well. The ingredients in order to constitute a criminal breach of trust are: (i) entrusting a person with property or with any dominion over property (ii) that person entrusted (a) dishonestly misappropriating or converting that property to his own use; or (b) dishonestly using or disposing of that property or wilfully suffering any other person so to do in violation (i) of any direction of law prescribing the mode in which such trust is to be discharged (ii) of any legal contract made touching the discharge of such trust. (Paras 8 & 9)

       (ii) Indian Penal Code, 1860-Sections 415 and 420-Offence of cheating-Ingredients-Case law-Mere failure to fulfil promise subsequently-Is not cheating-2000(4) SCC 1861 and 2000(3) SCC 693 relied on. 1999(8) SCC 686 followed.

       Held : The ingredients of an offence of cheating are: (i) there should be fraudulent or dishonest inducement of a person by deceiving him, (ii) (a) the person so deceived should be induced to deliver any property to any person, or to consent that any person shall retain any property; or (b) the person so deceived should be intentionally induced to do or omit to do anything which he would not do or omit if he were not so deceived; and (iii) in cases covered by (ii) (b), the act of omission should be one which causes or is likely to cause damage or harm to the person induced in body, mind, reputation or property. (Para 10)

       To hold a person guilty of cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise. From his mere failure to keep up promise subsequently such a culpable intention right at the beginning, that is, when he made the promise cannot be presumed. (Para 11)

        It is further held that a provision made in the agreement for referring the disputes to arbitration is not an effective substitute for a criminal prosecution when the disputed act constitutes a criminal offence. (Para 13)

       (iii) Criminal Procedure Code, 1973-Sections 200 and 203-Scope explained-Words sufficient ground mean that a prima facie case is made out against accused-Case law referred.

       Held : In case of a complaint under Section 200 Cr.P.C. or IPC a Magistrate can take cognizance of the offence made out and then has to examine the complainant and his witnesses, if any, to ascertain whether a prima facie case is made out against the accused to issue process so that the issue of process is prevented on a complaint which is either false or vexatious or intended only to harass. Such examination is provided in order to find out whether there is or not sufficient ground for proceeding. The words sufficient ground used under Section 203 have to be construed to mean the satisfaction that a prima facie case is made out against the accused and not sufficient ground for the purpose of conviction. (Para 14)

       (iv) Criminal Procedure Code, 1973-Sections 200, 203 and 482-Indian Penal Code, 1860-Sections 406, 420 and 120B-Private complaint for offences of criminal breach of trust, cheating and criminal conspiracy against appellants-Appellants alleged to have not performed the contract using fraud, criminal breach of trust and cheating by conspiracy-No entrustment of any property alleged-No dishonest intention from the beginning alleged-Magistrate issuing process-High Court refusing to interfere u/s. 482 Cr.P.C.-Whether correct? (No)-Appeal allowed in part because prima facie case of cheating only is made out against appellant 7 only-Regarding appellants 1-6 and 8 no offence is made out-Case law referred.

       Held : Turning to the facts of the case, there is nothing either in the complaint and/or in the sworn statements of the complainant and the three witnesses that any property was entrusted to any of the appellants at all or the appellants had domain over any of the properties of respondent No. 2 which they dishonestly converted to their own use so as to satisfy the ingredients of Section 405 IPC punishable under Section 406 IPC. Further the agreement also did not require entrustment of any property to the appellants. Taking the complaint and the statements of the witnesses as they are, it cannot be said even prima facie, that the appellants committed any offence punishable under Section 406 IPC, since the ingredients of that offence were not satisfied. Hence the learned Magistrate committed a serious error in issuing process against the appellants for the said offence. Unfortunately, the High Court also failed to correct this manifest error. (Para 19)

       In order to constitute an offence of cheating, the intention to deceive should be in existence at the time when the inducement was made. It is necessary to show that a person had fraudulent or dishonest intention at the time of making the promise, to say that he committed an act of cheating. A mere failure to keep up promise subsequently cannot be presumed as an act leading to cheating. (Para 20)

       Looking to the complaint and the grievances made by the complainant therein and having regard to the agreement, it is clear that the dispute and grievances arise out of the said agreement. Clause 29 of the agreement provides for reference to arbitration in case of disputes or controversy between the parties and the said clause is wide enough to cover almost all sorts of disputes arising out of the agreement. As a matter of fact, it is also brought to our notice that the complainant issued a notice dated 3.10.1997 to the appellants invoking this arbitration clause claiming Rs. 15 lacs. It is thereafter the present complaint was filed. For the alleged breach of the agreement in relation to commercial transaction, it is open to the respondent no. 2 to proceed against the appellants for his redressal for recovery of money by way of damages for the loss caused, if any. Merely because there is an arbitration clause in the agreement, that cannot prevent criminal prosecution against the accused if an act constituting a criminal offence is made out even prima facie. Many a times, complaints are filed under Section 200 Cr.P.C. by the parties with an oblique motive or for collateral purposes to harass, to wreck vengeance, to pressurize the accused to bring them to their own terms or to enforce the obligations arising out of breach of contract touching commercial transactions instead of approaching civil courts with a view to realize money at the earliest. It is also to be kept in mind that when parties commit a wrongful act constituting a criminal offence satisfying necessary ingredients of an offence, they cannot be allowed to walk away with an impression that no action could be taken against them on criminal side. A wrongful or illegal act such as criminal breach of trust, misappropriation, cheating or defamation may give rise to action both on civil as well as on criminal side when it is clear from the complaint and sworn statements that necessary ingredients of constituting an offence are made out. May be parties are entitled to proceed on civil side only in a given situation in the absence of an act constituting an offence but not to proceed against the accused in a criminal prosecution. Hence before issuing a process a Magistrate has to essentially keep in mind the scheme contained in the provisions of Section 200-203 of Cr.P.C. keeping in mind the position of law stated above and pass an order judiciously and not mechanically or in routine manner. The learned Magistrate, in our view, having regard to the facts stated and the legal position explained above, committed a serious error in issuing the process against the appellants 1 to 6 and 8 for offences under Sections 406, 420 and 120-B IPC when the acts alleged against them did not constitute these offences satisfying their ingredients even prima facie. In the light of the material brought on record at that stage process could have been issued only as against the appellant No. 7, that too for an offence under Section 420 IPC only. (Paras 21, 22 & 23)

       In the case on hand, we have already stated above that except against the appellant No. 7, no offence was made out against the remaining appellants as the ingredients of offences alleged against them were not satisfied. Unfortunately, the High Court failed to exercise jurisdiction under Section 482 Cr.P.C. to correct manifest error committed by the learned Magistrate in issuing process against the appellants 1-6 and 8 when the alleged acts against them did not constitute offences for want of satisfying the ingredients of the offences. The approach and considerations while exercising power and jurisdiction by a Magistrate at the time of issuing process are to be in terms of Sections 200 to 203 under Chapter XV of Cr.P.C., having due regard to the position of law explained in various decisions of this Court, and whereas while exercising power under Section 482 of Cr.P.C. the High Court has to look at the object and purpose for which such power is conferred on it under the said provision. Exercise of inherent power is available to the High Court to give effect to any order under the Cr.P.C., or to prevent abuse of the process of any court or otherwise to secure the ends of justice. This being the position, exercise of power under Section 482 Cr.P.C. should be consistent with the scope and ambit of the same in the light of the decisions aforementioned. In appropriate cases, to prevent judicial process from being an instrument of oppression or harassment in the hands of frustrated or vindictive litigants, exercise of inherent power is not only desirable but necessary also, so that the judicial forum of court may not be allowed to be utilized for any oblique motive. When a person approaches the High Court under Section 482 Cr.P.C. to quash the very issue of process, the High Court on the facts and circumstances of a case has to exercise the powers with circumspection as stated above to really serve the purpose and object for which they are conferred. Thus having regard to facts and circumstances stated and discussion made above, the issue of process against appellant Nos. 1-6 and 8 is set aside and the process issued against appellant No. 7 namely, Amrit Lal Desai @ A.B. Desai for offences under Sections 406 and 120B is also set aside. However, the issue of process against him under Section 420 IPC is maintained. The order of the learned Magistrate and the impugned order are modified to this extent. Thus, this appeal is partly allowed and stands disposed of in the above terms. (Paras 26 & 27)